Miscellaneous Rumbles

Gibson building sold

2

I tried to log onto the Henry J. story but it wanted me to subscribe. There was a blurb that said only 20% of Gibson's business comes from guitars; that true? A friend who purchased Gibson's recording software just found out that they dumped the software and won't be supporting it in the future.

3

Look grim. Get out while you can.

4

Wouldn't it be funny if Epiphone goes independent, turns around and buys Gibson?

5

Wouldn't it be funny if Epiphone goes independent, turns around and buys Gibson?

– BuddyHollywood

Like with K Mart and Sears.

6

isn't the original article just about the buildings and land and not about the company? The corporations mentioned seem to have bought a parking lot and downtown factory in Memphis, plus some other investment properties in Nashville, which would pump a bunch of capital into Gibson Brands, but it doesn't look like they actually bought the company itself.

But still in all, that's almost as dangerous. Prime example- Sears (as noted above), which sought to stave off bankruptcy through sale of its most significant assets (land and buildings). If Gibson is doing the same willingly, then their road is likely to be a lot shorter than long and winding.

7

Gibson has bought up quite a few music related businesses (not guitar---4 or 5 piano companies and other things) trying to get a larger market segment. Spread themselves too thin.

8

Wouldn't it be funny if Epiphone goes independent, turns around and buys Gibson?

– BuddyHollywood

Then making guitars under the 'Gibson' logo in Asia. Maybe that's the perfidious plan.

P.S. Actually of course only the Memphis building is sold so far.

9

I really think it would be tragic if Gibson goes under.

10

And just when people are beginning to warm to those phenomenal robot tuners....

11

Sure they have made some extraordinary decisions in recent years, but they still make some incredible guitars. Some of the guitars they have made in the past ten years are as good as anything anyone has made. Like any brand - including Gretsch - they make plenty of models I have no interest in. But those models I do like - wow, they can be awesome.

12

It would be sad. Not a fan of the brand but it would be missed , as much or more, than Ford would if they did the same. It's an iconic American brand, if there is such a thing anymore.

13

There was a blurb that said only 20% of Gibson's business comes from guitars; that true?

I think a more interesting statistic would be what percentage of their losses are generated by guitar manufacturing.

14

And just when people are beginning to warm to those phenomenal robot tuners....

– Strummerson

15

Gibson is in a bit of trouble these days, but they'll get it sorted out I'm sure. Word was that the facility in Memphis was too big and costly for their needs. They are supposedly going to eventually find another location that is smaller for manufacturing only and no showroom. Read that somewhere recently.

16

Hope they survive and continue to have manufacturing in the USA.

17

Word was that the facility in Memphis was too big and costly for their needs. They are supposedly going to eventually find another location that is smaller for manufacturing only and no showroom. Read that somewhere recently. -- Zigracer

This was stated in the original article ("Music Radar") mentioned in my thread about 6 weeks ago...

http://gretschpages.com/for...

Personally I don't think this means Gibson is on the verge of collapse. Yes, their financials appear to be "challenging"..... But other companies have faced similar problems and have found ways to survive and, in many case, prosper. I hope that is the case for Gibson. While I don't like the sounds of many of the rumors and rumblings on the internet, Gibson has a wonderful history of building high quality and beautiful instruments. True -- some of the recent gadgets and brainstorms seem questionable at best. However, our own Favorite G-brand went through some seriously bad ideas about 50 years ago......

18

Hope they can stay afloat and stay in US. Be a shame to lose such an icon.

19

Maybe it would be best if Gibson went bust and sold the brand to Heritage guitars for a symbolic figure.

20

This sale was inevitable. And with the fact they they are bleeding cash, more cash needs to be raised along with a negotiated refinancing to avoid outright default in about 8 months.

Most of Gibson’s business isnt guitars. But guitars are a big oart of the problem with weak demand, soft pricing power, and wood supply issues.

Sorry for posting the lengthy annoucement below but it seems that some may not be aware of the dire situation faced by the debt holders and the company:

August 17, 2017 -- Moody's Investors Service downgraded Gibson Brands, Inc.'s ("Gibson") Corporate Family Rating to Caa3 from Caa2, its Probability of Default Rating to Caa3-PD from Caa2-PD, and senior secured notes to Ca from Caa3. The rating action is due to Moody's concern with Gibson's weak operating performance, liquidity pressure from approaching maturities, and the view that the company's capital structure is unsustainable. The rating outlook is negative.

"We feel that Gibson's capital structure is unsustainable due to the uncertainty over its ability to refinance debt that comes due in July 2018 and August 2018 given its very high leverage and weak operating performance," said Kevin Cassidy, Senior Credit Officer at Moody's Investors Service.

Debt/EBITDA is approaching 10 times.

"*Despite our expectation of debt reduction over the next year with the expected proceeds from asset sales, we think debt/EBITDA will remain high at around 8 times," noted Cassidy. Moody's expects Gibson to significantly decrease its cost structure over the remainder of the year.*

****This should eventually lead to sustained margin improvement, although there is uncertainty about the timing of when the benefits are realized. "We expect EBITDA to remain essentially flat this year as we think margin enhancements will not be enough to offset revenue declines," said Cassidy.

Moody's expects a significant decrease in revenue this year as the company reduces the number of SKUs in the Audio business and deals with the lingering effects of supply shortage issues that began in the first quarter of the fiscal year ended March 2018, new government regulations for certain wood products, and long-term secular pressure on guitar volumes in the Musical Instrument business.

Moody's downgraded the following ratings of Gibson Brands, Inc.: Corporate Family Rating to Caa3 from Caa2; Probability of Default Rating to Caa3-PD from Caa2-PD; $375 million senior secured notes due 2018, to Ca (LGD 4) from Caa3 (LGD 4) Outlook is Negative

RATING RATIONALE Gibson's Caa3 Corporate Family Rating reflects the company's untenable capital structure given its high leverage, weak liquidity profile including negative free cash flow and significant refinancing risk, and the highly discretionary nature of its musical instrument and consumer electronics product lines. The company's high leverage at around 10 times debt/EBITDA at June 30, 2017 reflects weak operating performance trends and debt previously issued to fund acquisitions that have underperformed expectations. Moody's is also concerned that high turnover in the company's senior financial management level creates challenges to executing a quick operational turnaround. Gibson's ratings are supported by the company's strong brand recognition in musical instruments and market share for guitar products, and diversified product line within guitars and related music areas. The ratings are also supported by its geographic diversification.

The bulk of Gibson's debt matures in 2018 and liquidity is weak because Gibson is reliant on new external capital to refinance the maturities. Gibson's $375 million of outstanding senior secured notes mature August 1, 2018 and the maturity of roughly $145 million of outstanding secured bank loans will spring to July 23, 2018 if the notes are not refinanced by that date.

The negative outlook reflects the uncertainty about the company's ability to refinance its debt on acceptable terms and quickly execute an operational turnaround.

Ratings could be downgraded if the company does not refinance its debt obligations well before maturity, the company pursues a debt restructuring that Moody's would likely consider a default, or potential recovery values weaken. If revenue and earnings trends do not reverse and begin to stabilize ratings could also be downgraded. The company needs to materially improve its operating performance and address its upcoming debt maturities before Moody's would consider an upgrade.

Headquartered in Nashville, Tennessee, Gibson Brands Inc. designs, manufactures, markets, and globally distributes premium musical instruments, consumer and professional audio and video products, information products, and related accessories. The company's product offerings are marketed under a portfolio of brands including Gibson, Philips, Epiphone, Kramer, Baldwin, Onkyo, KRK, and Stanton. Revenues approximate $1.2 billion

21

"Grow or die"... the motto of the hedge fund-er. Too bad so many folks think of it as gospel.

22

If they can just hang on till the new tax law gets passed, I'm sure the middle class and working poor and newly retired will be more than willing to go to bat for another deserving American Icon in distress!

23

If they can just hang on till the new tax law gets passed, I'm sure the middle class and working poor and newly retired will be more than willing to go to bat for another deserving American Icon in distress!

– F107plus5

Need any profits before paying taxes.

24

"Grow or die"... the motto of the hedge fund-er. Too bad so many folks think of it as gospel.

– Kevin Frye

The plan is to shrink and stabilize. That is always the plan with distressed companies bought by private equity firms.

25

Yup, "Grow or die", ....followed by shrink and stabilize, ....then, harvest time!


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